If there’s one general problem with donor-advised funds, or DAFs, it’s that a lot of people have never heard of them. Even the nonprofits that could best benefit from them are in the dark.
Elizabeth Wagner, vice president of development at the Princeton Area Community Foundation, wants to change that. On Wednesday morning, May 24, Wagner was scheduled to “Getting & Giving: Donor Advised Funds & Other Community Foundation Funding Tools for Nonprofits” at the Mercadien Group in Hamilton. Visit PACF.org or E-mail email@example.com for more information.
DAFs are akin to a portfolio investment, in that a donor commits money to a charitable purpose through a community foundation and then designs how and when that money will be distributed, Wagner says. Donors choose what organizations to help, how much to send, and the timeframe to release the money. Maybe it sits there for a few years, maybe it goes out immediately. The main thing donors need to know is that once committed, there’s no getting the money back. It must go to charitable causes.
But though that’s all fairly straightforward, and though DAFs have been around for a long time, Wagner says charitable organizations “are very confused about how to use them.” For one thing, a lot of nonprofits don’t know they exist. For another, many nonprofits are not sure how to deal with gifts made through stocks. And even if they do know about DAFs, a lot of nonprofits don’t really know much about community foundations.
Community foundations like PACF act as middlemen for DAFs. They manage the investment and see that donations are made when and where they need to be. “We’re a link between philanthropic people and the nonprofits they help,” Wagner says.
But even though they’ve also been around a long time, since 1914 in fact, community foundations are not very common on the east coast. They’re popular in the Midwest, Wagner says, but New Jersey has only three such organizations. Even financial advisors often overlook DAFs as an option.
The flexible way to give. To set up a donor-advised fund through PACF, a donor would need at least $10,000 (private foundations generally require $100,000). The only other restrictions are that the money put into a fund is irrevocable, and the nonprofits of the donor’s choosing must be U.S.-based and designated 501(c)3 organizations in good standing.
Beyond those criteria, the sky’s the limit, Wagner says. Donors can set up DAFs using cash, securities, real estate, or almost any other kind of asset. Funds can go to nonprofits in every state, and they often do.
“The funds often support very grassroots organizations,” she says. About half of the money PACF sends out on donors’ behalf ($16 million last year) was given to causes in Mercer County and the surrounding area.
Donors stepping up. PACF president and CEO Jeffrey Vega says donor-advised funds are especially valuable in times when nonprofits face federal or state funding cutbacks. Donors tend to become more generous when there is an absence of money from government or corporate funding sources.
Right now, he says, organizations aimed at helping homeless people — like HomeFront in Lawrenceville — are seeing fewer dollars from those sources, “so donors are stepping up.”
While Vega is thrilled to see philanthropic people being more generous, the reason they need to be more generous is not nearly so pleasant. He says the dynamic shows just how complex the charitable giving universe really is.
Community members. Community foundations are, as their name implies, part of the community. That means, “we’re more than just a bank,” Vega says. “We’re a nonprofit organization ourselves.”
As a result PACF has a lot of connections in the community of nonprofits. Community foundations in general are able to link people up with the best places to put their charitable dollars, Vega says. It’s a way to foster charitable giving beyond just sending checks to groups on a specific date.
Wagner has a bachelor’s in art history and English from Smith College. Her mother was an attorney in the financial field and her father worked in computer systems beginning in the 1970s. She served as vice president at J.C. Geever from 2002 to 2010, when she joined PACF.
Vega grew up in Irvington to parents who met in South America. His father was an artist and musician from Cuba touring Peru, where he met his future bride. They moved to New Jersey and raised Vega (and his sister, who was born in Mexico on the continuing tour). He earned three bachelor’s degrees — urban studies, human ecology, and international environmental studies — from Rutgers. In 1991 he earned a master’s degree in public policy at the Eagleton Institute of Politics at Rutgers.
Vega began his career in nonprofits at New Brunswick Tomorrow in 1993. He served as president from 2000 to 2014. In 2015 he became CEO of PACF.
For both Vega and Wagner, what makes DAFs and community foundations so valuable is the sense of direct community involvement. Community foundations are not just banks doling out funds on a schedule, he says. They’re part of the community, which means they know what communities, organizations, and donors in general really need to do to make charitable dollars work best.
“We know where the needs are,” Wagner says. “Here we’re really focused on children and adolescents living in poverty.”
That knowledge allows donors to know where they most need to step up if they want to support a cause, she says. And it’s rewarding to see donations from this one corner of New Jersey benefit so many organizations nationally. It makes her job a lot of fun.
“We get to work with people who have such wonderful ideals,” she says.